Revamping Services

Sweeping Changes Necessary To Avoid Tax Increases

June 20, 1993

By now, Virginians should be accustomed to gloomy financial forecasts coming from Richmond. Demands for services are outstripping revenue growth. Balancing the state budget is more difficult each year.

Secretary of Finance Paul W. Timmreck says the state must contain costs for mandated programs or alter citizen expectations of governmental services. The three areas of mandated programs that cause budget makers the most problems are education, public safety and health and human services. They consume 85 percent of all revenue from individual and corporate income taxes, the lottery and the sales tax.

During Virginia's boom years, 1985-90, Medicaid, corrections, education and mental health programs accounted for 76 percent of increased spending from the general fund. Medicaid spending increased 109 percent - almost twice the rate of total state spending.

But during those same years, jobs in Virginia increased 4.1 percent a year, 46,200 people moved into the state each year and salaries and wages went up 8.8 percent a year. By comparison, Timmreck predicts that between 1991 and 1994, jobs will grow 0.3 percent a year, 4,500 people will move into the state each year and salaries and wages will increase 4.2 percent a year.

So far in the 1990s, Medicaid is growing at seven times the rate of other spending. So much for any hope of containing the costs of mandated programs.

What about changing citizen expectations? Timmreck suggests managed care could rein in Medicare increases. To save the cost of building new prisons, he suggests alternative punishment for many non-violent criminals. He likes some of the ideas colleges are considering - students working at computers instead of sitting in a lecture hall; proficiency tests to exempt required courses; a degree in three years instead of four.

If Timmreck is right when he predicts a $700 million revenue shortfall for the 1994-96 biennium, the state must find more cost-effective ways to provide current services. And all citizens must change their expectations.